In a dramatic move, the preliminary investigations by the Judge of Rome, on the order of the Public Prosecutor of

In a dramatic move, the preliminary investigations by the Judge of Rome, on the order of the Public Prosecutor of Rome, under request from Italian financial regulator Consob has directed Italian ISPs to block numerous binary options cites from appearing in Italy. Banned sites are ipotion.com, tradersmarter.com, bocapital.com, eztrader.com, startoptions.com, and anyoption.com.

According to the reports that were first posted by Italian language news sites late last month, Consob believes that binary options closely could resemble gambling and are the aforementioned firms are not in compliance with Italian financial rules due to the way the product is marketed. Additionally, as binary options are defined as a regulated instrument under MiFID rules, offering the product requires approved EU regulation which these firms fail to have.

Speaking on the matter, Lawyer Fulvio Sarzana, whose firm Sarzana and Partners works on behalf of Italian internet service providers, and has also posted about the subject, said “Consob believes that binary options are more similar to gambling than to financial services.” He added that “Financial watchdogs in Italy had made complaints last year about binary options trading, which led to warnings, but these notices seems to be ignored by companies.” When asked of whether the current list of firms is final, and whether other binary options companies that are marketing in Italy are at risk of having their websites blocked, Sarzana answered “this is probably just the first step and I would be willing to bet that more binary options companies will be effected.”

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This isn’t the first time that binary options are coming under scrutiny from regulators. Last year we saw the Japanese FSA send a note to brokers to suspend the marketing of new binary brands during the period that the regulator was working to create laws to govern the product. Also, in conduct similar to the current Italian policies, the Turkish Capital Markets Board had published a document in June 2012 that accused several binary options brokers of criminal activities and had ISPs block their IPs into Turkey.

As such, with the prevalent gambling like marketing promoting the binary ‘win or lose’ payout, it’s only a matter of time before more regulators receive complaints from clients and begin to become more proactive in preventing unregulated firms from marketing in their countries. Specifically, France and Spain have issued warnings to firms in the past which could prelude to additional moves now that Italy has set a precedence within the EU. Also, as mentioned above, companies marketing in Italy, but that were unaffected by this wave of ISP blocking are vulnerable to further actions.

(update-previously this post was written to reflect that the EU had yet to make a formal decision on binary options, when in fact it had been ruled that the product falls within the definition of financial instruments under MiFID)

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Andy

Binaries (digitals) can easily be replicated with exchange-traded vanilla options. And without spreads where you can drive a truck through too. I think the Italians should be able to cope without these firms..

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5 years ago

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Andy

Binaries (digitals) can easily be replicated with exchange-traded vanilla options. And without spreads where you can drive a truck through too. I think the Italians should be able to cope without these firms..

Yoohoo! Another country banning them! But still may be not enough to reverse the trend… The binary options trend must be terminated. Binary options must become financial instruments, regulated and controlled in aspects…rights and obligations, features, pricing, execution, not this bunch of crap that the “binary options industry” has become. We are not all gamblers! We are not all stupid! We understand pricing, all the hidden pricing that it is there! We understand greeks! Give us properly made and priced exotic options to allow option strategies instead of bets, bespoke options with custom payout instead of predefined choices, trading and… Read more »

Yoohoo! Another country banning them! But still may be not enough to reverse the trend… The binary options trend must be terminated. Binary options must become financial instruments, regulated and controlled in aspects…rights and obligations, features, pricing, execution, not this bunch of crap that the “binary options industry” has become. We are not all gamblers! We are not all stupid! We understand pricing, all the hidden pricing that it is there! We understand greeks! Give us properly made and priced exotic options to allow option strategies instead of bets, bespoke options with custom payout instead of predefined choices, trading and… Read more »

@Andy: I’m not sure all binaries can be replicated easily. Otherwise everyone would just use replication. Replication is more algorithmic, requires adjustments to the market and I quite believe some payout structures, like the american (touch) binaries, would be very hard to impossible to replicate, especially around strikes and near expiry. Plus it’s not easy to learn it, and documentation is not available or written for everyone’s understanding. @Ron : I’m sure Italy doesn’t matter too much. It’s just one country. The target customer is lacking financial education, and probably doesn’t even understand how the world works. Certainly they didn’t… Read more »

@Andy: I’m not sure all binaries can be replicated easily. Otherwise everyone would just use replication. Replication is more algorithmic, requires adjustments to the market and I quite believe some payout structures, like the american (touch) binaries, would be very hard to impossible to replicate, especially around strikes and near expiry. Plus it’s not easy to learn it, and documentation is not available or written for everyone’s understanding. @Ron : I’m sure Italy doesn’t matter too much. It’s just one country. The target customer is lacking financial education, and probably doesn’t even understand how the world works. Certainly they didn’t… Read more »

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5 years ago

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Andy

Bogdan: yes barrier options cant be replicated with vanillas(at least not in a static fashion), but digitals can be.

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5 years ago

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Andy

Bogdan: yes barrier options cant be replicated with vanillas(at least not in a static fashion), but digitals can be.

what i find outrageous is that these outfits call their products binary options and promote them as financial products. Most of them are just rogues using the Tech Financial white label. The fact that they are located in Cyprus which is currently on the brink adds icing to the cake.

what i find outrageous is that these outfits call their products binary options and promote them as financial products. Most of them are just rogues using the Tech Financial white label. The fact that they are located in Cyprus which is currently on the brink adds icing to the cake.

I agree Dan, nervous times regarding the whole Cyprus situation and the possible future issues with dealing there, let alone this gray area on regulation. I have been trawling the sites looking for alternative regulation and found the Isle of Man also and it seems a decent option (excuse the pun!) as it doesnt seem dressed up. Bet on Markets looks a good site, also found out that MarketsWorld are regulated out there and they have a statement on their site which makes interesting reading as they have picked up on the market vibe http://articles.marketsworld.com/2013/03/26/markets-world-why-regulation-jurisdiction-matters/#.UV6lcByfjrM Crazy times thats for sure… Read more »

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5 years ago

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Steve Norris

I agree Dan, nervous times regarding the whole Cyprus situation and the possible future issues with dealing there, let alone this gray area on regulation. I have been trawling the sites looking for alternative regulation and found the Isle of Man also and it seems a decent option (excuse the pun!) as it doesnt seem dressed up. Bet on Markets looks a good site, also found out that MarketsWorld are regulated out there and they have a statement on their site which makes interesting reading as they have picked up on the market vibe http://articles.marketsworld.com/2013/03/26/markets-world-why-regulation-jurisdiction-matters/#.UV6lcByfjrM Crazy times thats for sure… Read more »

@Dan: Is that website yours? Loved the “Trading or Gambling”, but you should definitely update your BetOnMarkets reviews. Too much of the nice stuff was removed. Though they are the pioneers, there are still a lot of things missing… Too many restrictions on conditional closes, no Double Touch/Double Contra (hmm…too careful with hedge vehicles), and quite hard to check the pricing quality. But the big names that are worth a look are BetOnMarkets, GFT and SaxoBank. I still hope that BetOnMarkets improves its product offering and at least to bring back the Double Touch/Double Contra; and perhaps good conditional liquidation… Read more »

@Dan: Is that website yours? Loved the “Trading or Gambling”, but you should definitely update your BetOnMarkets reviews. Too much of the nice stuff was removed. Though they are the pioneers, there are still a lot of things missing… Too many restrictions on conditional closes, no Double Touch/Double Contra (hmm…too careful with hedge vehicles), and quite hard to check the pricing quality. But the big names that are worth a look are BetOnMarkets, GFT and SaxoBank. I still hope that BetOnMarkets improves its product offering and at least to bring back the Double Touch/Double Contra; and perhaps good conditional liquidation… Read more »

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5 years ago

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Dan

Bogdan I’d actually like to contact you – on which e-mail could I reach you please?

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5 years ago

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Dan

Bogdan I’d actually like to contact you – on which e-mail could I reach you please?